TEL> Vol.2 No.2, May 2012

A Preliminary Investigation of the Optimal Percentage Requirement in an Electricity Market with Tradable Green Certificates

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ABSTRACT

Around the world, energy markets are being liberalized with the goal of achieving fully competitive markets while at-taining environmental policy objectives. This paper considers a system of Tradable Green Certificates (TGCs)—a mar-ket based regulatory instrument designed to promote electricity generation from renewable energy sources. In a TGC program, the principal policy instrument is the “percentage requirement” which stipulates the percentage of total elec-tricity generation that must be obtained from renewable sources. This paper provides a preliminary investigation of the socially optimal choice of the percentage requirement in a Cournot duopoly setting. The paper discusses the problem geometrically and considers some of the practical difficulties associated with the determination of the optimal percent-age requirement. Several important avenues for generalization of the results are also discussed.

Cite this paper

K. Currier and S. Rassouli-Currier, "A Preliminary Investigation of the Optimal Percentage Requirement in an Electricity Market with Tradable Green Certificates," Theoretical Economics Letters, Vol. 2 No. 2, 2012, pp. 216-220. doi: 10.4236/tel.2012.22039.

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